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India may collect 15% Covid tax on petrochem/chemicals imports

India is considering a proposal to levy 15% Covid-19 tax on all chemical and petrochemical imports from May 1, 2020 to March 31, 2021 to protect domestic industry. As per the proposal, the provisional duty would also be applicable on all preferential imports under India’s various free trade agreements (FTA), and would cover organic chemicals, inorganic chemicals, plastics, rubber, man-made filaments and man-made staple fibres.

“The proposal has been made by a certain section of industry to the department of chemicals and petrochemicals, and the department is still doing stakeholder consultations,” said an official in the know of the details.

The 15% tax would be in addition to the lowest tariff called applied most favoured nation (MFN) duty in trade parlance.

India imported $86.8.2 billion of these products between April 2019 and January 2020 with almost 14% of the inward shipments coming from China alone.

The commerce department is yet to take a stance on the issue and is awaiting a formal proposal by the department of chemicals and petrochemicals.

“Several industries, which are dependent on chemicals, raw materials or intermediate goods in these sectors, have opposed the proposal,” the official added.

Various industries such as chemicals and plastics have vetoed the proposal, citing similar action by other countries that would harm Indian exports.

“Any further burden of additional duty would be a huge burden on industries and will be difficult to sustain. If our country imposes Covid tax on chemicals imported from other countries and if the said countries also start to levy additional duty on exports from our country, it will be disastrous for our chemical exports industry,” said a representative from the chemical industry.

India’s chemical exports fell almost 42% on year in April to $1.2 billion while those of plastics declined 25% to $478.47 million last month.

The commerce and industry ministry is already working on a plan to substitute imports under the Atmanirbhar Bharat Abhiyan and is looking to correct duty structures, including any duty discrepancies with countries that India has FTAs with. Incentives to promote local production and export competitiveness such as export incentives parity with China and duty-free import of plant and machinery could also be offered for the chemical and petrochemicals sector.

Economic Times